Payments on principal and most interest on the loans of these companies are to be frozen for three months. That will keep the massive Daewoo machine from coming to a screeching halt. And it avoids putting the group - which has 90,000 employees in Korea, accounts for more than 10 per cent of the country's exports and whose book value assets of 76 trillion won ($63 billion) are greater than the gross domestic product of the Philippines -- into formal bankruptcy, analysts said. "It's really ugly," said Stella Um, banking analyst for Ing Barings in Hong Kong, said of the debtworkout programme. "It shows how bad the situation is for Daewoo. It's a bankruptcy situation if they can't service the debt." "What is going on is a roundabout nationalisation of Daewoo entities," said Hank Morris, director of Seoul-based Industrial Research and Consulting.

"The objective of the government and the Korean banks is to keep these units out of the bankruptcy process so they don't have to write off all these debts immediately," he said. "The government obviously does not want to leave Daewoo management in charge of the asset sale process," said Morris.

Daewoo is supposed to sell major assets by the end of the year. Daewoo's Korean creditors over the next three months will "play a more proactive role in the group's restructuring in a more predictable and stable environment", said a statement from the Financial Supervisory Commission late on Thursday.

Daewoo owes some $10 billion to foreign creditors and it is not at all clear that they are all on board with the latest life support planfor the group. Daewoo said a meeting with its foreign creditors on Friday had been delayed until both sides sort through the workout with Korean creditors. The foreign creditors fall into two categories - those with Korean based operations and those which do not but who lent to one of Daewoo's many overseas entities.